HC Deb 08 March 1967 vol 742 cc1623-33 The Minister may from time to time by Statutory Instrument direct that the aggregate amount of subsidy under Clause 27(1)(b)(i) shall be increased: Provided that he shall so direct that the subsidy be increased pro rata when the mortgage rate is greater than 6¾ per cent.—[Mr. G. Campbell.]

Brought up, and read the First time.

Mr. G. Campbell

I beg to move, That the Clause be read a Second time.

We believe that it should be possible for the Minister to vary the scheme in the amount of the subsidy element, depending on the circumstances. In particular, it should be possible for the Minister to increase the subsidy if the mortgage rate goes particularly high—otherwise, the borrower may be left where he was at the beginning.

The Government propose to give subsidy assistance to the extent of 2 per cent., but if mortgage rates continue to rise it is possible—I sincerely hope not probable—that the complete 2 per cent. assistance could be wiped out by mortgage rates going up further and further between the time when the scheme was first announced and when it came into effect.

Consider what has been happening. When the first scheme was announced, a year ago, the mortgage rate was 6¾ per cent. It is now 7⅛ per cent. It has gone up by ⅜ per cent. and, therefore, the amount of assistance which anyone hearing the scheme being announced a year ago thought would be given has already been reduced. Instead of being 2 per cent. it is 1⅝ per cent., and this erosion has occurred over only a few months. When the Government came to office, two and a half years ago, the rate was 6 per cent. It has, therefore, gone up by 1⅛ per cent. in that time.

There is already provision in the Bill whereby the 2 per cent. of subsidy assistance may be reduced if interest rates fall, and this is related to the figure of 4 per cent. It therefore seems reasonable that there should also be provision for increasing the subsidy if the mortgage rate increases to a high level—and we have suggested if it goes higher than 6¾ per cent., that being the percentage at the time when the scheme was first announced.

The new Clause by itself may not be enough and the Minister may reply that the Government need power to reduce again when the mortgage rate falls. If it is necessary to have power to vary downwards as well as upwards, I will not argue with that. I am not suggesting that, having increased the subsidy to meet for example a rate of 7⅛ per cent., the current rate, the increase in the subsidy should remain when the rate drops to, perhaps, 6½ per cent. or 6 per cent.

We merely propose that there should be power to increase if mortgage rates go abnormally high—otherwise, the assistance which this scheme is designed to give could be virtually wiped out and the 2 per cent., or a good part of it, eliminated. If extra power is required to vary downwards as well as upwards, I will be the first to say that the Government, as long as they agree with the principle of the new Clause, should have that power if it is not already in the Bill.

In short, the principle of the new Clause is that when mortgage rates go above 6¾ per cent., the 2 per cent. covered by subsidy, which is at present written into the Bill, should be increased accordingly.

Mr. MacColl

The hon. Member for Moray and Nairn (Mr. G. Campbell) moved the new Clause with clarity and persuasiveness, more persuasiveness than the reality of the case justifies. It is true that if the interest rate rises, a proportion of the value of the subsidy falls. However, the difference between the two is not a very great amount.

The hon. Gentleman said that the rate of interest was now 7⅛ per cent., but I urge him to compare that figure with the tables which we have supplied. One must compare the amount paid by the taxpayer at the standard rate and what the option mortgagee pays. At 6¾ per cent., the standard rate taxpayer pays £7 less in the first year than the option mortgagee, but in the twenty-fifth year he pays £13 more.

At a rate of 7⅛ per cent. he would pay £8 less in the first year, and, at the end of 25 years, he would again pay £13 more. The point of interception of the two rates is in the fourteenth year at 6¾ per cent. and the fifteenth year at 7⅛ per cent. so I do not think that there is a great deal of difference.

I expect that interest rates will not rise to this extent. I do not expect that the Opposition will agree with me on that. I am sure that they will be disappointed if they cannot see some rise.

On the whole, two things fix interest rates. One is the competition of interest rates in other countries, which we cannot control, the other is inflation in this country—

8.30 p.m.

Mr. G. Campbell

I thought that I had made it clear that we were hoping that interest rates would not rise, but that we should put a provision like this in legislation so that if they did go high, borrowers would not suffer or have their subsidy eroded. I would be happy if this provision, once in the Bill, never had to be used.

Mr. MacColl

We agree on that. As far as one can tell, without giving hostages to fortune, our position over inflation is much better. The Government's policy is holding the position. The balance of payments is much better and the Bank Rate has already come down. Therefore, the omens are favourable and there is no case, I would have thought, for adding this to the Bill, particularly in view of the small difference between the different rates of interest.

Mr. Bessell

I am mystified and disappointed by that reply. There is nothing in the new Clause which would compel the Minister to make any Order. It is left entirely to his discretion and depends upon the possible eventuality of a rise in interest rates. The hon. Gentleman said, rightly, that the interest rates were to a large extent outside the control of any Government of any political label. Conditions outside these shores can force interest rates up astronomically, as has happened in the past, and may happen again.

There is nothing new about inflation; we have known it for many years. I would be the last to suggest that Her Majesty's Government are responsible for the inflation which we have suffered over the last two and a half years, or that the Opposition were responsible for any ills of the previous 13 years. These things are outside the control of Parliament or any Government.

I cannot understand what possible objection there could be to a new Clause which is reasonable and reasoned and cannot weaken the Government's case. It provides greater elasticity for their administration of the Bill. One point which might commend itself to the Parliamentary Secretary—although his speech suggested that his mind was closed—is that when many people begin the purchase of a house they may be relatively well off, but, by the time they reach retirement age, their incomes may have dropped or the ever-increasing cost of living may have made their incomes less valuable. Any increase in the interest which they have to pay will be a serious burden towards the end of the purchase period.

This is a strong argument for accepting the new Clause and I earnestly beg the Parliamentary Secretary to consider it again. It can do no harm. It does not weaken the Bill. It simply gives an additional power of discretion which his right hon. Friend or his successor might be very glad that Parliament had had the wisdom to insert in the Bill.

If the Opposition intend to press the Clause to a Division, as I hope that they will, I will gladly support them again in the Lobby.

Mr. Channon

As the evening goes on the hon. Member for Bodmin (Mr. Bessell) becomes more and more adept at seeing our points. I am grateful to him for reversing his earlier attitude. I do not agree with him, however, that the Joint Parliamentary Secretary's reply was mystifying. The hon. Gentleman did not have the advantage of noting the reaction of the Joint Parliamentary Secretaries in Committee. Their replies do not mystify me, but they greatly disappoint me.

My hon. Friend the Member for Moray and Nairn (Mr. G. Campbell), as always, made a most reasonable case. My only criticism was that he could have illustrated it with a great many mathematical points which he chose not to use. I regret that, because I shall have to do it instead, and it will not be so good. We are not asking much in the Clause. The Government could easily agree to it without its costing them very much. It would enable them to give the help they have promised to owner-occupiers.

When the famous 1st March scheme was introduced, the mortgage rate was 6¾ per cent. It is now 7⅛ per cent. When my right hon. Friends left office in 1964, it was 6 per cent. In those days it was possible to borrow £3,000 over 25 years at the then rate of 6 per cent. and the total cost would have been £5,865. At 6¾ per cent. the cost of borrowing £3,000 over 25 years comes to £6,291. At 7⅛ per cent. it comes to the enormous figure of £6,507.

A man who took out a £3,000 mortgage in 1964 at 6 per cent. over 25 years, when the standard rate of Income Tax was 7s. 9d. in the £, would find, if he wanted to take out a similar mortgage today, that, as housing costs have risen by 16 per cent., as the standard rate has risen from 7s. 9d. to 8s. 3d., and as the mortgage rate has risen from 6¾ per cent. to 7⅛ per cent., he would need, not a £3,000 mortgage, but very nearly a £3,500 mortgage. The weekly payment would be about £4 6s. All standard rate taxpayers, certainly up till April, 1968, are very much worse off now than they were when the Conservatives left office. I do not think that either Parliamentary Secretary would be disposed to challenge that assertion.

I come to the option mortgage scheme. Let us look at the Government's own figures. One of the extraordinary things about the Bill is that no sooner was the White Paper "Help for Home Ownership" published in December, 1966, than it was out of date. The mortgage rate of 6¾ per cent. which governed the table in the White Paper for an advance of £1,000 repayable over 25 years became, not 6¾ per cent., but 7⅛ per cent. When we debated the Second Reading, the White Paper was completely out-of-date. While I am most grateful to the Joint Parliamentary Secretary for providing the members of the Committee with figures showing the differences between a 7⅛ per cent. interest rate and a 6¾ per cent. interest rate, I was astonished by his decision that he was not prepared to produce a new White Paper so that the whole world could have the benefit of the figures the members of the Committee received. The difference is substantial. Over 25 years at 6¾ per cent., someone who opts will have to repay £5,158 if he borrowed £3,000. At 7⅛ per cent. he will have to repay £5,390—an extra £232.

Those are considerable figures, and although they will admittedly be disguised over a period of 25 years they make a great difference. I was glad to hear from the Parliamentary Secretary that it was his personal view that we were unlikely to see higher mortgage interest rates than there are at present. Let us hope that he is right, but in view of our experiences since the Party opposite came to power we cannot be confident about that.

The table and the recommended rates of interest at the back of the National Board for Prices and Incomes Report on the rate of interest for building society mortgages shows that since the Conservatives came to office in 1951 the mortgage interest rate varied between 4½ and 6½ per cent., which it reached for just two months in 1961. For the rest of that time it was around 5 or 6 per cent.

Three months after the Party opposite came to power the interest rate went up from 6 to 6½ per cent., the highest it had been for over a quarter of a century. I do not have the figures back to the beginning of the century, but it was certainly the highest since before the war. In May, 1966, the Council of the Building Societies Association had to recommend a rate of interest of 7⅛ per cent. although it was able to defer its implementation for existing borrowers until 1st January, 1967.

People are therefore paying for mortgages at a higher rate than at any time since well before the war. That leads me in passing to say how much stronger our case has been at all stages, because even with the relief given by the mortgage option scheme the house buyer will have a 5⅛ per cent. rate—and that will not be until April next year—and will be worse off than in 1964, when house prices, the standard rate of Income Tax and the mortgage interest rates were lower.

It is not unreasonable for us to assume that when they announced the scheme the Government determined that people should get relief based on the 6¾ per cent. rate, which was what it was then. Let us hope that the Parliamentary Secretary is right and that the rate never goes beyond its present 7⅛ per cent. If it does not, the new Clause will not cost the Government a great deal. The Parliamentary Secretary pointed out that the Government do not think that there is much in the difference of ⅜ per cent., although I think that over a period of 25 years it is substantial. I invite them to accept the new Clause, since they do not think that there is much in it, and it will be just for the people concerned. If the rate went up, further serious problems would be created for people, and the mortgage repayments would be worse than they are at the moment. I hope that it will not, but I think that we are entitled to ask that the Government should give the extra help for which we ask.

8.45 p.m.

Without trying to raise the temperature —difficult at this hour, even if I wanted to—I must say that it is typical Socialist planning that, no sooner is the scheme introduced, than it is out of date. Indeed was out of date even before it was debated let alone brought into effect. Goodness knows what relevance it will have in April, 1968. The least palliative that the Government can offer to rescue their miserable housing record is to give us this small Amendment which would safeguard the position of those buying their houses should interest rates rise further and the mortgage rate go up again.

Mr. Bessell

The essence of the new Clause surely is that it is discretionary and that there is no need for the Minister to act upon it unless he so chooses. Therefore, there can be no possible reason for the Government to reject it.

Mr. Channon

Much as I value the support of the hon. Gentleman the Member for Bodmin (Mr. Bessell), since he has put the question I would hate to mislead the House. The second sentence in the Clause, which is perfectly fair, is that the subsidy should

… be increased pro rata when the mortgage rate is greater than 6¾ per cent.

Mr. Bessell

But is not the second sentence dependent upon the first? The first begins: The Minister may from time to time by Statutory Instrument … Is not the second sentence dependent upon the discretion of the Minister?

Mr. Channon

That is an interesting reading of the words. Perhaps I can leave it by referring to the second sentence: Provided that he shall so direct that the subsidy be increased pro rata when the mortgage rate is greater than 6¾ per cent. This certainly gives the Minister discretion by Statutory Instrument at other times if he wishes to direct that such a thing be done and we would not wish to rob him of that discretion.

This is a modest Clause. It would help people buying their own homes. It would cost little. I hope that I still have the support of the hon. Member for Bodmin.

Mr. Bessell

indicated assent.

Mr. Channon

We have had a negative attitude from the Parliamentary Secretary, who was so charming in Committee but has today proved so dogged, repressive, unco-operative and unwilling to help the wretched home-owners who are now striving against the burden of Socialism forced on them at the last election and which they already bitterly regret. I ask my right hon. and hon. Friends to support this Clause in the Lobby.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 97, Noes 167.

Division No. 289.] AYES [8.48 p.m.
Alison, Michael (Barkston Ash) Harris, Frederic (Croydon, N.W.) More, Jasper
Allason, James (Hemel Hempstead) Harris, Reader (Heston) Murton, Oscar
Batsford, Brian Harrison, Col. Sir Harwood (Eye) Nott, John
Bessell, Peter Harvie Anderson, Miss Page, Graham (Crosby)
Bossom, Sir Clive Heseltine, Michael Percival, Ian
Brewis, John Hill, J. E. B. Pink, R. Bonner
Brinton, Sir Tatton Hirst, Geoffrey Powell, Rt. Hn. J. Enoch
Bromley-Davenport,Lt.-Col.SirWalter Holland, Philip Pym, Francis
Brown, Sir Edward (Bath) Hornby, Richard Ridley, Hn. Nicholas
Buck, Antony (Colchester) Howell, David (Guildford) Ridsdale, Julian
Bullus, Sir Eric Hutchison, Michael Clark Roots, William
Campbell, Gordon Irvine, Bryant Godman (Rye) Royle, Anthony
Carr, Rt. Hn. Robert Jenkin, Patrick (Woodford) Russell, Sir Ronald
Channon, H. P. G. Jones, Arthur (Northants, S.) Shaw, Michael (Sc'b'gh & Whitby)
Cooke, Robert Jopling, Michael Sinclair, Sir George
Crouch, David Joseph, Rt. Hn. Sir Keith Stoddart-Scott, Col. Sir M. (Ripon)
Cunningham, Sir Knox King, Evelyn (Dorset, S.) Summers, Sir Spencer
Dalkeith, Earl of Kirk, Peter Taylor,Edward M. (G'gow,Cathcart)
Dance, James Kitson, Timothy Taylor, Frank (Moss Side)
Davidson,James(Aberdeenshire,W.) Knight, Mrs. Jill Teeling, Sir William
Dean, Paul (Somerset, N.) Lancaster, Col. C. G. Turton, Rt. Hn. R. H.
Eden, Sir John Langford-Holt, Sir John Vaughan-Morgan, Rt. Hn. Sir John
Errington, Sir Eric Legge-Bourke, Sir Harry Walker, Peter (Worcester)
Farr, John Lloyd, Ian (P'tsm'th, Langstone) Walker-Smith, Rt. Hn. Sir Derek
Fortescue, Tim McAdden, Sir Stephen Walters, Dennis
Gibson-Watt, David Maclean, Sir Fitzroy Weatherill, Bernard
Gilmour, Ian (Norfolk, C.) McMaster, Stanley Webster, David
Gilmour, Sir John (Fife, E.) Maxwell-Hyslop, R. J. Wells, John (Maidstone)
Goodhew, Victor Maydon, Lt.-Cmdr. S. L. C. Wills, Sir Gerald (Bridgwater)
Grant, Anthony Mills, Peter (Torrington) Winstanley, Dr. M. P.
Grant-Ferris, R. Mills, Stratton (Belfast, N.) Wylie, N. R.
Gurden, Harold Miscampbell, Norman
Hall-Davis, A. G. F. Mitchell, David (Basingstoke) TELLERS FOR THE AYES:
Mr. Monro and Mr. Eyre.
NOES
Albu, Austen Fletcher, Raymond (Ilkeston) Oakes, Gordon
Allaun, Frank (Salford, E.) Foot, Michael (Ebbw Vale) Ogden, Eric
Allen, Scholefield Ford, Ben O'Malley, Brian
Anderson, Donald Forrester, John Orbach, Maurice
Archer, Peter Garrett, W. E. Orme, Stanley
Armstrong, Ernest Gordon Walker, Rt. Hn. P. C. Oswald, Thomas
Ashley, Jack Gray, Dr. Hugh (Yarmouth) Owen, Dr. David (Plymouth, S'tn)
Atkins, Ronald (Preston, N.) Greenwood, Rt. Hn. Anthony Padley, Walter
Atkinson, Norman (Tottenham) Hamling, William Page, Derek (King's Lynn)
Bagier, Gordon A. T. Harper, Joseph Pannell, Rt. Hn. Charles
Barnett, Joel Harrison, Walter (Wakefield) Park, Trevor
Baxter, William Haseldine, Norman Parkyn, Brian (Bedford)
Bishop, E. S. Hattersley, Roy Pavitt, Laurence
Blackburn, F. Henig, Stanley Pearson, Arthur (Pontypridd)
Blenkinsop, Arthur Hobden, Dennis (Brighton, K'town) Pentland, Norman
Body, Richard Hooley, Frank Price, Thomas (Westhoughton)
Booth, Albert Horner, John Probert, Arthur
Boyden, James Houghton, Rt. Hn. Douglas Rankin, John
Braddock, Mrs. E. M. Hughes, Emrys (Ayrshire, S.) Redhead, Edward
Brooks, Edwin Hunter, Adam Rees, Merlyn
Broughton, Dr. A. D. D. Irvine, A. J. (Edge Hill) Rhodes, Geoffrey
Brown, Rt. Hn. George (Belper) Jackson, Peter M. (High Peak) Roberts, Albert (Normanton)
Brown,Bob(N'c'tle-upon-Tyne, W) Janner, Sir Barnett Robinson, W.O.J.(Walthamstow,E.)
Brown, R. W. (Shoreditch & F'bury) Jones, Dan (Burnley) Rose, Paul
Buchan, Norman Jones, J. Idwal (Wrexham) Rowland, Christopher (Meriden)
Buchanan, Richard (G'gow, Sp'burn) Judd, Frank Shinwell, Rt. Hn. E.
Cant, R. B. Kelley, Richard Short, Mrs. Renée(W'hampton,N.E.)
Carter-Jones, Lewis Lawson, George Silkin, Rt. Hn. John (Deptford)
Castle, Rt. Hn. Barbara Leadbitter, Ted Silverman, Julius (Aston)
Chapman, Donald Lestor, Miss Joan Slater, Joseph
Coe, Denis Lewis, Ron (Carlisle) Small, William
Concannon, J. D. Lomas, Kenneth Spriggs, Leslie
Crawshaw, Richard Loughlin, Charles Steele,Thomas (Dunbartonshire,W.)
Dalyell, Tam Lyon, Alexander W. (York) Swain, Thomas
Davidson, Arthur (Accrington) Lyons, Edward (Bradford, E.) Tinn, James
Davies, Dr. Ernest (Stretford) McCann, John Urwin, T. W.
Davies, Ednyfed Hudson (Conway) MacColl, James Varley, Eric G.
Davies, Robert (Cambridge) Macdonald, A. H. Wainwright, Edwin (Dearne Valley)
Davies, S. 0. (Marthyr) McKay, Mrs. Margaret Walden, Brian (All Saints)
Delargy, Hugh Mackintosh, John P. Walker, Harold (Doncaster)
Dempsey, James McNamara, J. Kevin Watkins, David (Consett)
Dickens, James Mallalieu, E. L. (Brigg) Wellbeloved, James
Dobson, Ray Manuel, Archie Wells, William (Walsall, N.)
Doig, Peter Mapp, Charles Whitlock, William
Dunnett, Jack Marquand, David Wilkins, W. A.
Dunwoody, Mrs. Gwyneth (Exeter) Mellish, Robert Willey, Rt. Hn. Frederick
Dunwoody, Dr. John (F'th & C'b'e) Millan, Bruce William, Alan (Swansea, W.)
Eadie, Alex Milne, Edward (Blyth) Williams, Clifford (Abertillery)
Edwards, Rt. Hn. Ness (Caerphilly) Morgan, Elystan (Cardiganshire) Williams, W. T. (Warrington)
Edwards, Robert (Bilston) Morris, Charles R. (Openshaw) Winterbottom, R. E.
Edwards, William (Merioneth) Morris, John (Aberavon) Woodburn, Rt. Hn. A.
English, Michael Moyle, Roland Woof, Robert
Evans, Albert (Islington, S.W.) Murray, Albert Yates, Victor
Evans, loan L. (Birm'h'm, Yardley) Neal, Harold
Faulds, Andrew Newens, Stan TELLERS FOR THE NOES:
Finch, Harold Noel-Baker, Francis (Swindon) Mr. Grey and Mr. Gourlay.
Fitch, Alan (Wigan) Noel-Baker,Rt.Hn.Philip(Derby,S.)